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Why Do I Need to Understand Finance

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Why Do I Need to Understand Finance

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  • August 6, 2010
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Why Do I Need to Understand Finance?

A non-financial manager may ask, "Why do I need to understand finance?" The primary purpose of financial information is to allow managers to make informed decisions about their business, business department or product line. Their decisions are crucial for their business to succeed, and lead to the real concerns of any organization which are profit maximization and maximizing wealth of stockholders. Though, non-financial managers don't have to know every detail of finance; they need basic knowledge to understand what their company faces when making major decision.

The overall value of finance for managers is to grow their business over long period of time, since stockholders are interested in receiving gains over several years and not just one or two quarters. Lastly, understanding finance will help managers make decisions on questions such as:

- Which projects to implement or products to produce because the return on investment is higher?
- Will profit increase or decrease by launching a new product? - Can we justify training of existing personnel or hiring of additional personnel?

Finance can change a manager's decisions into return on investment, and determine the drivers in their company's financial performance.

Reference:

Moskovitz, J. (2010, March 28). Accounting and Finance for Non-financial Managers. Retrieved May 3, 2010 from http://www.understandfinancialinformation.com/2010/03/accounting-and-finance-why-do-i-even.html

Finance for Non-finance Managers. (2009, July 27). Retrieved May 3, 2010 from http://www.articlealley.com/article_1001131_15.html